Current Predictions On COVID-19's Market Effects Are Probably Unreliable

Predicting the future is a fool's errand.

There are some things about the future - depending upon the time span we're using - that are likely, probable, and some, almost certain to happen. The sun will rise and set, your car will start in the morning, sporting events will be played as scheduled, trains, boats, and planes will arrive and depart more or less on time, and so on with the more mundane, routine activities of day-to-day living.

What we're talking about are the more obtuse and difficult expectations and predictions about stocks rising or falling, which teams are going to make the playoffs, who's going to win certain political contests. Those kinds of events and occurrences are subject to more variables, some known, more unknown.

Six months ago, nobody was predicting that China would quarantine half of its population due to an outbreak of an infectious virus, such as COVID-19. Without factoring in the knock-on effects due to sickness, disease, and the Chinese government's efforts to contain it, prognostications concerning what is happening or will happen in coming days, weeks, and months will almost certainly be far off the mark.

Even today, with advanced predictive tools and advancements in medical understanding, extrapolation from the known has been made more difficult by questioning the veracity of data, the intentions of the people keeping score, and other factors that haven't even emerged as of yet.

Adding to the confusion is the quickened flow of information, much of which is nothing more than idle hyperbole or nothing less than outright lies. even less is known about where the virus started (still under investigation and likely to be never verified 100%), how fast and haw far it will spread and to what degree it will affect people's lives in countries and cultures as distinct as night and day. Information from various scientific sources still range across the spectrum in terms of the transmission rate, mortality rate, makeup of the virus, and potential for vaccines or cures.

All of this is making it difficult for investors and fund managers to gauge the downstream. Variables, upon which predictions could be made, aren't even in place, so most of what's being bantered about is just so much hot air and steam. Some people are scared to death of the virus; others believe that it's only about as harmful as the ordinary flu.

Enter the human condition. Rationality and emotion are playing tug-of-war in the macro as well as the micro sense. Nobody can be much more than 50% certain about anything a month, two months, six months or a year out.

What we've been able to discern already is a sense that the virus is not going to cause widespread disease and death of the magnitude of a Spanish Flu, Bubonic Plague or any other major pandemic. While there's widespread consensus that COVID-19 is unlikely to bloom into a massive killer, that does not mean that it won't, nor does it factor in other outside influences which are presently not apparent.

Thus far, merely a month into the coronavirus event, stocks have shown an incredible ability to withstand downside pressure while bonds have catalyzed into the safety play. The 10-year-note has rallied. From January 17 to February 18, the yield has fallen from 1.84% to 1.55%, a decline of 15.76 percent, a pretty good move under any circumstances.

Gold and silver had been less uniform in their price movement, with notable ups and downs. Spot gold has increased from 1557.60 on 1/17 to 15.89.85 on the 2/18. Silver, on the same span of time, began at 18.06 and finished at 17.89. Those are spot prices; action on the paper exchanges has been more volatile, though not significantly aroused.

On the surface, the market effect from COVID-19 appears to be not very eventful, but there are sure to be other variables coming into play which may make for an uneven ride into and through the future.

At the Close, Tuesday, February 18, 2020:
Dow Jones Industrial Average: 29,232.19, -165.91 (-0.56%)
NASDAQ: 9,732.74, +1.56 (+0.02%)
S&P 500: 3,370.29, -9.87 (-0.29%)
NYSE: 14,039.01, -58.29 (-0.41%)

WEEKEND WRAP: No Panic in Markets As COVID-19 Story Unfolds

In the US, a long weekend offered the opportunity to assess and reassess positions, but, from Friday afternoon through Tuesday morning, nothing substantially changed in the macro picture of global markets.

COVID-19 continues to dominate headlines, though attention has begun to focus on the spread of the virus outside of mainland China. Johns Hopkins, which provides the most unbiased numbers available, shows 898 reported cases worldwide. For perspective, that number compares to 343 reported on February 8, just 10 days prior.

While there are plenty of alarmists touting this infectious variant as the second coming of the Spanish flu, the available evidence purports to something less deadly. While the mortality rate has remained in the neighborhood of 2-3 percent in China, only a handful of deaths (four) have been directly attributable to infection from the coronavirus.

Wall Street appears to share the view that the virus is not a deadly killing machine, having put together a solid week, however, realization of knock-on effects from the mass quarantines in China are beginning to strike home.

It's been about a month now since the outbreak became apparent in China and efforts to stop the spread of information about it turned to efforts to actually contain the virus itself. Mainland factories have been shuttered and many are not soon to open to full capacity just yet. That's causing disruptions in various supply chains, the effects being noted throughout the global marketplace.

Looking forward, stocks, still at or near record prices, are almost certain to come under some pressure in the coming short week.

Oil has rebounded slightly as the world comes to grips with a glut of crude on the market. WTI continues to trade just above $50 per barrel.

The US treasury bond curve remains flat, with the 10-year note closing out the week at 1.59 percent.

There's unlikely to be any more clarity within the next few days or even weeks as the situation involving the virus is still evolving. Investors looking for a reason to exit have a reasonable excuse to do so.


At the Close, Friday, February 14, 2020:
Dow Jones Industrial Average: 29,398.08, -25.22 (-0.09%)
NASDAQ: 9,731.18, +19.21 (+0.20%)
S&P 500: 3,380.16, +6.22 (+0.18%)
NYSE: 14,097.34, -1.66 (-0.01%)

For the Week:
Dow: +295.57 (+1.02%)
NASDAQ: +210.66 (+2.21%)
S&P 500: +52.45 (+1.58%)
NYSE: +165.41 (+1.19%)

Correction: In earlier posts this January, Money Daily had mentioned that Yum Brands owned KFC and Pizza Hut locations through out China. That is incorrect. Yum's China properties were spun off in 2016. We regret being in error.

China Raises 108 Coronavirus (COVID-19) Victims From the Dead

Roughly five weeks into the coronavirus (COVID-19) story and really nothing much has materialized. Stocks are making new all-time highs, gold and silver have barely budged, though bonds have rallied in recent days.

Much of the stagnation or up-and-down noise from the equity markets is probably tied to China's somewhat opaque rendering of figures relating to the virus. While the death rate to the number of reported cases has remained fairly constant around 2.1-2.5%, there are no footnotes on the data, nor is there any means by which to verify their accounting.

Additionally, after upping the total number of cases and deaths dramatically on Wednesday, China took some back on Thursday, essentially raising 108 people from the dead by what they dubbed "double counting."

This fumbling, feeble excuse and the fact that the Chinese government won't allow teams from the US CDC into the country to help, the obvious takeaway is that their numbers are wholly unreliable, most likely under-reported.

The media, along with the experts at WHO are about as in the dark as they can be, and are reporting from their backsides with information that is either inaccurate, misleading, or just plain lies.

With each passing day it becomes more and more apparent that ordinary people in this world are on their own when it comes to determining how to react and respond to this supposedly pandemic, deadly threat.

At the Close, Thursday, February 13, 2020:
Dow Jones Industrial Average: 29,423.31, -128.11 (-0.43%)
NASDAQ: 9,711.97, -13.99 (-0.14%)
S&P 500: 3,373.94, -5.51 (-0.16%)
NYSE: 14,099.04, -37.94 (-0.27%)

China Announces Massive Increase In Number of New Cases of COVID-19 (coronavirus, Wuhan Flu, WuFlu)

Money Daily claims no special powers, but, just by coincidence, after yesterday's post cried out to the Chinese for transparency, some actually was delivered.

Coming too late to affect the meteoric rise in US stocks on Wednesday, China's official propaganda wing may be coming to its senses, albeit quite late in the game.

Late Wednesday, instead of the usual 2500-3000 new reported cases and 90-100 fresh deaths from the newly-named COVID-19, China's Ministry of Truth instead announced 14,840 new cases and 242 deaths.

The new totals are being reported with some differences, but John Hopkins' usually-reliable counts have mainland China at 59,822, with worldwide reported cases at 60,349. There are 527 confirmed cases outside of China and a total of 1,370 deaths, all but two occurring in China.

These are alarming numbers, only now shedding some light on just how widespread the viral infection has gone on mainland China, and just how deeply Chinese officials have been trying to cover up the carnage. It's one thing to fudge economic numbers, which China does regularly and gratuitously, but quite another when human lives are at stake.

Revelation of the virus spreading faster, affecting more people by orders of magnitude and killing more than double the numbers previously reported raised eyebrows around the world, sending markets into reverse, though not to any alarming degree. Asian and European markets staged orderly retreats of less than one percent.

Hoping to avoid complete panic, international indices are being buoyed by central banks, no doubt furiously buying behind the scenes as the severity of the condition in China becomes more apparent. Supply chains already have broken down and this is only the beginning. With China looking to be out of commission for the better part of this and next month - possibly longer - the disruption to global trade and manufacturing cannot and should not be understated.

Being the global hub for manufacturing, China, by being late in its attempts to contain the spread of COVID-19 and then attempting to downplay the severity of the crisis it faces has put its own economy and that of the globalized world in jeopardy.

This story continues to evolve and the implications just became much more serious than the Chinese government, the WHO and health officials in other countries are admitting.

Money Daily will attempt to stay atop current developments on a daily, if not more frequent, basis.

At the Close, Wednesday, February 12, 2020:
Dow Jones Industrial Average: 29,551.42, +275.12 (+0.94%)
NASDAQ: 9,725.96, +87.02 (+0.90%)
S&P 500: 3,379.45, +21.70 (+0.65%)
NYSE: 14,136.98, +82.88 (+0.59%)

Wall Street Plays Wait-and-See On Coronavirus (WuHan Flu)

Without a source more trustworthy than the Communist Party of China (CPC) for accurate data on the coronavirus (Wuhan Flu), it's difficult to make an assessment of the threat from the disease which has spread to 25 countries and two cruise ships, but has so far resulted in only 517 confirmed cases and two deaths, one in Hong Kong and another in the Philippines.

Inside mainland China, it's apparently a different story, what with 44,685 confirmed cases and 1114 deaths, the government is trying to maintain the people's spirit, but, with something on the order of 400 million people under quarantine orders, theres little doubt that patience is wearing thin.

Wall Street has, for the most part, faded the fallout from the virus's effect on China's economy and its part in the global supply chain until yesterday, when stocks slumped after an initial upside burst, leaving the Dow on the downside and the other indices hanging onto marginal gains. Notable was the NYSE, which led all the averages percentage-wise, an outlier occurrence, and possibly the beginning of a shift into small cap stocks.

Commodities were flat, with gold and silver barely budging from unchanged and oil settling around the $50 mark for WTI crude.

US treasuries escaped from inversion, with the 10-year note finishing at 1.59% yield and bills with maturities of less than a year all lower than that, albeit by only a few basis points. The 30-year bond is sitting precariously on a yield of just 2.05%.

China, notorious for supplying information that is either corrupted, massaged, or goal-sought to the pleasure of the Party, is difficult to gauge in terms of what it's telling the rest of the world. Are there 1100 dead from the virus or 11,000? Have over 4000 recovered, or more, or less? And what were the treatments involved?

None of this information is readily available as China is keeping a tight lid on the details. One thing is for sure: plants that were closed first because of the Lunar New Year holiday and had their closures extended by the threat of the virus are still closed, even though many were supposed to reopen on Monday, February 10. That's a worry Wall Street cannot overlook for long. With companies supplying component parts from everything from automobiles to washing machines, the effect of their closure will be felt up the chain. Car-makers outside of China, Nissan, Tesla, Kia, and others have already announced plant closures due to supply disruption. The longer the Chinese factories remain shuttered, the worse it is not only for the Chinese economy, but the global condition as well.

The overarching theme from the public start of the virus in early January to today has been one of questions about the virulence of the virus, the length of its incubation, the mortality rates. These questions have been answered in roundabout manners, but the big one, where does this all end? remains a mystery. China says the spread of the virus is slowing; the WHO says a global heightening of risk is on the horizon.

For the time being, everybody is playing a wait-and-see game.

At the Close, Tuesday, February 11, 2020:
Dow Jones Industrial Average: 29,276.34, -0.48 (-0.00%)
NASDAQ: 9,638.94, +10.55 (+0.11%)
S&P 500: 3,357.75, +5.66 (+0.17%)
NYSE: 14,054.08, +69.60 (+0.50%)